This year has seen an incredible rise in the price of most cryptocurrencies in the crypto world. The market capitalization of the industry recently surpassed $600 billion, cementing its place in the world economy and investors portfolios. Many of the leading cryptocurrencies have seen their values grow astronomically over the course of the past year, and one unsuspecting factor may be contributing to the large price swings.
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A bot in this context refers to the automatic buying and selling of certain cryptocurrencies in the space without the investor actually pulling the trigger. Bots can help an investor to not use emotions when buying or selling, as they will buy or sell based on certain stipulations set forth by the investor. Bots are incredibly important in many markets and not just cryptocurrencies. Volatility is something that has remained characteristic of the cryptocurrency world since its inception. Price swings in the tens and hundreds of percents are something not uncommon amongst this market.
Bots have played a large part in several of the flash crashes that have occurred in the market. This could help to potentially create an almost pump and dump scheme as investors can end up paying higher prices for certain coins if bots drive the prices up. Bots will also sell at a certain point, but without investors doing the actual investing, the price of the coin can fall quite quickly. Investors who are doing the investment end up holding on to an almost worthless currency because of the action of these bots which leads to confusion and more importantly loss in the market. Bots are incredible difficult to detect however, and may continue to play a large part in the market for quite some time. Hopefully these bots can begin to slow down their interferences with the market as time goes on.